FINC330 Quiz 2 Answers
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Question 1
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1 / 1 point
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Fresh Water, Inc. sold an issue of 23-year $1,000 par value bonds to the public. The bonds have a 9.90 percent coupon rate and pay interest annually. The current market rate of interest on the Fresh Water, Inc. bonds is 9.17 percent. What is the current market price of the bonds?
Round the answer to two decimal places.
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Question 2
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1 / 1 point
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Pet Food Company bonds pay an annual coupon rate of 8.10 percent. Coupon payments are paid semiannually. Bonds have 5 years to maturity and par value of $1,000. Compute the value of Pet Food Company bonds if the market interest rate on this type of bond is 11.85 percent.
Round the answer to two decimal places.
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Question 3
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1 / 1 point
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Marco Chip, Inc. just issued zero-coupon bonds with a par value of $1,000. The bond has a maturity of 16 years and a yield to maturity of 13.03 percent, compounded semi-annually. What is the current price of the bond?
Round the answer to two decimal places
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Question 4
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0.5 / 1 point
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Fresh Fruit, Inc. has a $1,000 par value bond that is currently selling for $911. It has an annual coupon rate of 11.70 percent, paid semiannually, and has 28-years remaining until maturity. What would the annual yield to maturity be on the bond if you purchased the bond today and held it until maturity?
Round the answer to two decimal places in percentage form. You should use Excel or financial calculator.
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Question 5
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1 / 1 point
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Blue Crab, Inc. plans to issue new bonds, but is uncertain how the market would set the yield to maturity. The bonds would be 30-year to maturity, carry a 11.14 percent annual coupon, and have a $1,000 par value. Blue Crab, Inc. has determined that these bonds would sell for $952 each. What is the yield to maturity for these bonds?
Round the answers to two decimal places in percentage form.
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Question 6
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1 / 1 point
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King Farm Manufacturing Company’s common stock has a beta of 0.61. If the risk-free rate is 3.44 percent, and the market return is 5.95 percent, calculate the required return on King Farm Manufacturing’s common stock.
Round the answers to two decimal places in percentage form.
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Question 7
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1 / 1 point
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The prices for the White Swan Corporation for the first quarter of the last year are given below. Find the holding period return (percentage return) for February.
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Question 8
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1 / 1 point
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Calculate the expected return on stock of Alfa Inc. :
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State of the economy
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Probability of the states
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Percentage returns
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Economic recession
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34%
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-2.1%
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Steady economic growth
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13%
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5.2%
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Boom
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53%
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9.6%
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Round the answers to two decimal places in percentage form.
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Question 9
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0 / 1 point
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You are considering the purchase of Crown Bakery, Inc. common stock that just paid a dividend of $19.59 per share. You expect the dividend to grow at a rate of 1.04 percent per year, indefinitely. You estimate that a required rate of return of 12.18 percent, will be adequate compensation for this investment. What is the most that you would be willing to pay for the common stock if you were to purchase it today?
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Question 10
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1 / 1 point
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John invested the following amounts in three stocks:
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Security
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Investment
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Beta
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Stock A
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$562,900
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1.20
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Stock B
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$748,170
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1.54
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Stock C
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$361,712
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2.03
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